Role of Ethics in Organization

By

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION1

1.1 Introduction1

1.2 Contents of the Report2

CHAPTER 2: LITERATURE REVIEW3

2.1 Literature Review3

2.2 Defining Business Ethics and Fraud3

2.2.1 Summary of Ethical Theories and Concepts4

2.3 Business ethics6

2.3.1 Fraud11

2.4 Ethical leadership12

2.4.1 Transactional and Transformational Leadership13

2.4.2 Effective Ethical and Moral Leadership17

2.5 Control Mechanisms and Culture18

2.5.1 Control Issues and Trust19

2.5.2 Formal Ethics Programs20

2.5.3 Psychological Influence on Human Behaviour22

2.5.4 Organisational Culture and Ethics24

2.6 Summary25

CHAPTER 3: METHODOLOGY28

3.1 Research Setting28

3.2 Study Sample28

3.3 Research Method And Design Appropriateness In The Context Of The Problem29

3.4 Justification For Secondary Data Collection30

3.5 Justification For Application Of Semi-Structured Interviews30

CHAPTER 4: RESULTS32

4.1 How Far Do The Control Systems (Hard And Soft) Control The Ethical Behaviour Within An Organization?32

4.1.1 Operating In Grey Areas32

4.1.2 Fraud Triangle and Motivation for Unethical Behaviour33

4.1.3 Situational Pressure and Environmental Influence34

4.1.4 Trust, Authority and Tone at the Top35

4.1.5 Controls within Organisations37

4.2 How The Ethical Behaviour Of Management Most Effectively Controlled, And Can It In Fact Be Controlled?38

4.3 How Does A Manager Create An Ethical Culture Within An Organisation?40

4.3.1 Communication, Example and Awareness40

4.3.2 Reward System and Recognition42

4.3.3 Management Personality in Creating an Ethical Environment43

4.4 Summary43

CHAPTER 5: DISCUSSION45

5.1 Complexity of Business Ethics45

5.2 The Influence of Environment on Ethical Behaviour46

5.3 Management Responsibility in Creating an Ethical Environment47

5.4 Awareness as an Element of Control49

5.5 Summary52

CHAPTER 6: CONCLUSION54

6.1 Practical Applications and Findings54

6.2 Limitations of This Study and Notes for Future Research55

REFERENCES57

APPENDIX60

Interview Questions60

CHAPTER 1: INTRODUCTION

1.1 Introduction

“All fraud is done by those we trust. Trust is not control.”

-C.M. Thompson-



Corporate crisis are characterised by low-probability, high-consequences, organisational events that threaten the most fundamental goals of an organisation (Mitroff, Pauchant and Shrivastava 1988), as well as society at large. Currently, the corporate world is occupied with the implementation of new rules and regulations in response to the scandals/ crisis that recently took place in the United States (Enron) and in the Netherlands (Ahold), making ethical behaviour a global concern. This is the most significant issue at the moment, as companies are trying to perfect their management strategies and integrate new actions into their business continuity procedures to prevent unethical behaviour from occurring. Most of these internal control systems consists of hard controls, which include policies, procedures, and systems. These hard controls set the standards, and if employees comply with policies and follow the procedures, the objectives of the internal controls can be met. However, it is the soft controls, the competence, attention and integrity of the people in the organisation that make the final difference. One of the main reasons, why internal controls break down is ethics. Ethical, professional management sends a message down to all employees about being expected to be ethical and responsible in maintaining and applying these internal controls.

In order to foster, such a culture in an organization helps to deter fraud and other wrongdoings. This management report will research the role of ethics within organisations by looking into the elements of ethical behaviour, control of behaviour and maintenance of ethical culture. This research will be focusing on finding the answer of the general research question of how organisations can ...